Retirement Confusion Leads to Drop in Contributions From Millennials

Even though more millennials contributed money into their pensions in 2016, the overall savings total has noticeably dropped. Looking at the statistics, Generation Z has been revealed to be the demographic that has contributed the most to their retirements, with their pension wealth almost doubling in size. The causes of this drop in millennials investing in their future are for a variety of reasons, but the primary one appears to be the fact that so few people understand what a pension is or how it works. This is not solely limited to younger workers, but when a large percentage of millennials admit that they are confused about pensions, it’s clear that more needs to be done when it comes to explaining the importance of them.

Pension Problems

It’s not just the millennials workers who admit to confusion when it comes to their pension. Even the over-55s have said they would prefer to be given more information about their pension options. In fact, 27% of over-55shave said they would like it if there were more resources provided so that they are better able to make informed decisions about their pensions, how they work, and how to get the most from them. Pension advice specialists Portafinahave created a collection of information that not only explains more about how pensions work but the benefits of having one. These include:

Tax relief: If you look at your pension contributions as a form of cash-back, then you can make some big savings. When adding money to your pension, the government will refund your income tax payments. This can lead to significant long-term savings, although there is a limit.

Workplace Pensions: Your employer is legally obligated to provide you with a workplace pension, and they will be required to pay contributions at the minimum amount. In these cases, you can expect to pay around 3% of your wage, while your employer will contribute 2%. This is set to change in April 2019, when your contributions will rise to 5%, but your employer will have to contribute 3%. This is why workplace pensions can be massively useful when it comes to retirement.

Snowball Effect: Compound interest means that the more you put into your pension, the more money you can generate towards your pension. Looking at the tax breaks and tax reliefs options available, the fact is that the more money you put into your savings, the more money will accumulate in a snowball effect.

Millennial Issues

The high cost of living means that many millennials are finding it hard to justify putting money aside for the future. The combination of the high costs of renting a home alongside other financial commitments has clearly led to the drop in pensions contribution among younger workers. More education about the value that pensions offer is clearly vital. Looking at the advice from Portafina Discoverycan help you to understand the real value of prioritising your pension.

Having a better understanding about how pensions work and how they can also work for you is the key to getting more from them. If you want to have a more comfortable and stress-free retirement, then consider following Portafina on Twitter @Portafina_UK,YouTube, and LinkedIn.